Low base, rising demand accelerates June YoY industrial production

New Delhi, Aug 12 Rising demand, along with low base effect, accelerated India's June industrial output on a year-on-year basis.

Wavering impact of Covid 2.0 and easing of travel restrictions triggered demand and subsequently the production rate.

The Index of Industrial Production (IIP) for June showed a rise of 13.6 per cent from a decline of 16.6 per cent reported for the like month a year ago.

However, the production rate was lower than the exponential growth of over 28.60 per cent seen for May.

In June, the IIP index reading stood at 122.6 (index reading) as against May's 116.

The YoY and sequential growth rate movements are being impacted by the different types of lockdowns imposed during 2020 and 2021.

Last year, while the country observed a full-fledged lockdown, the same was partially imposed across different regions of the country.

"For the month of June 2021, the Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 stands at 122.6," the Ministry of Statistics and Programme Implementation said.

"The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of June 2021 stand at 105.5, 121, and 169.1 respectively."

Among the major use-based segments, the June data, on a YoY basis, showed that manufacturing of primary goods grew by 12 per cent from (-) 14.5 per cent, while capital goods production rose 25.7 per cent from (-) 37.4 per cent, and intermediate goods increased by 22.6 per cent from (-) 20.7 per cent.

Similarly, the production of infrastructure or construction goods rose by 19.1 per cent from (-) 18.3 per cent, and consumer durables' production grew by 30.1 per cent from (-) 34.8 per cent.

The sub-segment of consumer non-durables showed a growth of 6.9 per cent from (-) 4.5 per cent.

"The improving base prevailed over the impact of the state-level unlocking, causing the IIP growth to more-than-halve to 13.6 per cent in June 2021, mildly trailing our expectations, from the revised 28.6 per cent in May 2021."

"With the gradual lifting of restrictions by the states, the IIP recorded a sequential uptick of 5.7 per cent in June 2021, led by manufacturing (7.4 per cent), while remaining subdued relative to the April 2021 level, highlighting that the recovery was far from complete."

India Ratings and Research's Principal Economist Sunil Kumar Sinha said: "IIP for the month of June 2021 shows a YoY growth of 13.6 per cent and for 1QFY22 it shows a YoY growth of 44.9 per cent. Although the industrial output had recovered to the pre-Covid period (February 2020) in March 2021, it slipped thereafter due to the Covid 2.0."

"Industrial output data for June 2021 shows that it is gradually recovering but is still below the per-Covid period. In fact, several high frequency indicators such as power generation, fuel consumption, auto sales, railway freight etc are also showing similar recovery though in select cases the rebound has been faster after the Covid 2.0 than Covid 1.0."

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